Twin Cities grapple with glut of grocers
Minneapolis and St. Paul
After a bit of a shakeup, the drug channel is stable in the Twin Cities of Minneapolis-St. Paul. It began to evolve in 2010, with the purchase of the remaining 25 stores of 80-year-old Snyders Drug Stores Walgreens.
At the time, Love Goel, CEO of Minnetonka, Minn.-based private equity firm GVG Capital Group, said, “The reality of specialty retail is that if you’re not No. 1 or No. 2, you’re not going to be around. Walgreens and CVS dominate, and eventually, the others will evaporate or be consumed by these guys.
Eight years later, Goel seems to have been proven right. Today, ARM Insight reported that Walgreens enjoys an 82% market share in the Twin Cities, while CVS holds 16% and 2% goes to “Other.”
And while the drug channel has stabilized in the Twin Cities, the grocery channel is another story. For retailers, it’s a food fight. For shoppers, it’s a foodie’s dream.
“The grocery scene started to heat up and change toward fresh and local in 2016,” Todd Huseby, a partner with the global consultancy A.T. Kearney, said. “About the city as a foodie destination, local chef and TV personality Andrew Zimmerman said, ‘What used to be fly-over country is now as white-hot as any food destination in America, and is the most interesting.’”
Analysts consider the affluent Twin Cities to be an over-stored grocery market today. What led to this situation began in 2014 when Rainbow Foods closed or sold 27 stores, giving other grocers an opportunity to step in and snatch up its shoppers.
With some 58 stores in the Twin Cities, Cub Foods, a subsidiary of the once-powerful Supervalu, holds the top spot among grocers with a 21.6% share, according to ARM Insight. But analysts have reported a consistent market share decline for several years due to growing retail competition.
Other retailers with double-digit market shares are Target and Walmart at 20.6% and 18.9% respectively. Club stores Costco and Sam’s Club hold respective shares of 7.6% and 5.2%. Trailing Cub Foods in the grocery channel are Edina, Minn.-based Lunds & Byerly’s at 6.6% and Des Moines, Iowa-based HyVee at 4.2%
“Generally speaking in the food sector, there seems to be stifled growth from the publicly traded chains, as Wall Street is paying close attention to CapEx beyond e-commerce and technology investments,” Douglas Munson, principal at MTN Retail Advisors, said. “This is providing a window for some niche formats and chains to try to take advantage of the slow down by the larger publicly-traded companies. In Minneapolis, Hy-Vee is continuing steady growth.”
Hy-Vee is considered the most aggressive grocer in the market. It entered Minneapolis-St. Paul in 2015 and built its eighth store there last year. The family-owned Lunds & Byerly’s is an upscale operator that branched out into e-commerce two years ago. It operates five stores in the Twin Cities. Nipping at the heels of its larger competitors are such specialty retailers as Whole Foods, Trader Joe’s and Aldi.
Cub Foods is enlivening the grocery scene by modernizing stores and adding such attractive departments as a honey bar, popcorn stand, a burrito bar, and a juicery.
Grocers in Minneapolis/St. Paul are stocking more halal products to meet the cultural and dietary needs of the growing Somali population. Lari Harding, vice president of product strategy and marketing at Inmar, said offering this special product assortment is a necessity nowadays.
“If retailers don’t have the correct merchandise to appeal to immigrants, they may not at first perceive change because immigrants won’t be shopping at their stores,” she said. “Retailers seeing a decline in sales may not necessarily attribute it to changing demographics. Therefore, it’s important for retailers to maintain maximum awareness of how the population makeup is changing in the neighborhood outside of the store.”
Seattle: The area’s retail scene is more than just Amazon
To say Seattle and its surrounds have been experiencing a growth spurt as of late is an understatement. Simply put, this region’s economy is thriving. The job growth rate during the past decade has been impressive thanks in large part to Amazon. But its growth stretches beyond Amazon in that a significant number of Fortune 500 companies, many of which operate engineering and research businesses, also call Seattle home.
Not surprisingly, the area is highly attractive to millennials. But it is not a region without challenges. Real estate prices and escalating rents have severally limited the amount of affordable housing options, and the increasing number of people moving to the area is heavily straining the city’s roadways. Additionally, Seattle has long struggled with effectively addressing its large homeless population.
Taking what some have called an aggressive stance to remedy these issues, Seattle officials are working hard to make changes, from increasing the local minimum wage to $15, working with developers to create more affordable housing and opening access to preschool. The city also has pushed through a tax on short-term rentals, the funds of which will be earmarked for services for the homeless.
Hometown drug chain Bartell Drugs has been expanding both its footprint to 67 stores while building out its services. It has opened new Kaiser Permanente CareClinics, growing the total number to 15, and recently named its first CEO who wasn’t a member of the Bartell family. All of this has taken place as it looks to meet the needs of its Amazon-friendly city, offering its products through Amazon Prime.
In terms of retail growth, the Kirkland area added a Whole Foods and Trader Joe’s in 2017, a new Fred Meyer’s opened in Gig Harbor, while a new Town & Country Market was built in the Village at Harbor Hill also in Gig Harbor.
Other key retailers with a strong presence in the area include PCC Community Markets; Kroger, under its corporate banner, QFC, Metro Market and Fred Meyer; Whole Foods; Safeway; and new addition Amazon Go.
For shoppers whose driving factor is cost, Fred Meyer remains a top choice, but for many of the younger, urban professionals, retailers offering unique assortments are sought out. PCC’s Fremont location in Seattle, for example, is routinely touted for its quality prepared foods selection, gluten-free offerings, coffee bar and bakery goods, as well as its exemplary customer service.
QFC earns high points as well from shoppers for its friendly staff, well-organized floor plans, quality food offerings and affordable price points. Often cited for its local/farm/organic produce options, the retailer also carries a wide assortment of higher-end items and ethnic foods, as well as has an extensive beer and wine offering. The cheese island, sandwich station and restaurant-quality soup are also well sought after. And QFC earns extra brownie points from shoppers for offering free parking.
All eyes have been on the much-discussed Amazon Go, the experimental cashier-free convenience store located in downtown Seattle. The 1,800-sq.-ft. mini-market is stocked with many items easily found in other convenience stores, plus some items normally found at Whole Foods. Armed with Amazon’s smartphone app, shoppers place whatever they want to buy in a shopping bag and leave without the need to check out using a traditional cashier system. Minutes later, their Amazon account sends them a receipt via their smartphone. It’s still too early to know whether shoppers will love or hate the new concept, and Amazon remains mum on plans for expansion, but it does have some wondering if Whole Foods stores will benefit from the technology in the future, or if Amazon is interested in selling the system to other retailers.
Motor City’s retail scene firing on all cylinders
More than 4.3 million people call the Detroit metro area home. Slightly less than 4,000 square miles in area, the Motor City boasts a mix of suburbs and city space.
Steady employment gains and an increase in the number of new households are spurring retail growth in the region. More than 100,000 people have been added to the workforce in the past few years.
Widely known as having one of the largest economies in the nation, Detroit remains heavily dependent on the automotive sector with General Motors, Ford Motor and Chrysler all headquartered here. Just more than a dozen Fortune 500 corporations are based in the metro area, including CMS Energy, DTE Energy, Pulte Homes, Kelly Services, Lear, Amazon and Penske Logistics.
While the area has been experiencing growth the past decade, area leaders and officials are working to make sure the growth trend continues by courting other industries to the area, particularly those in the healthcare and technology sectors.
Whole Foods and Trader Joe’s have a presence in the area, but it is the Kroger banner that is most often seen here. The chain has been expanding its stores, relocating others or building new ones altogether. Throughout its growth, Kroger has stayed committed to offering shoppers local products, quality service and focusing on the local community. Its Kroger Marketplace format is garnering much of the attention these days. The 115,000-sq.-ft. Royal Oak location, for instance, offers everything from organic food options, fresh food, clothing, furniture and more. A full-service pharmacy offers free delivery of medication and there is a bank branch inside.
Fresh Thyme Farmer’s Market has been expanding in the Midwest and, particularly, in Michigan, as well. Shoppers love it for its atypical assortments, large private-label offering, emphasis on natural and organic, restaurant-quality sushi, gluten-free offerings and prepared foods.
Meijer also has a strong presence in the region. The privately-held company is best known for its customer service, well-thought-out layouts, low prices, quality foods, fresh produce and broad selections of national and Meijer-brand items. As the self-proclaimed inventor of the “one-stop shopping” supercenter concept, Meijer may have substantial general merchandise offerings, but it considers itself a grocery store first.